RNZ’s money correspondent Susan Edmunds.
Photo: RNZ
Got a burning question you want answered? Email susan.edmunds@rnz.co.nz
I’ve heard of people having investments in gold alongside things like shares and term deposits. Is that something that is worth doing?
Gold prices have risen steadily since the end of last year – the price of a gold bar even hit US$1 million (NZ$1.62 million) for the first time this week.
While most people won’t have the resources to invest in a whole bar, some retail investors do include precious metals in their investment portfolios.
Chris Smith, who is general manager at CMC Markets, describes the past year as “stellar” for gold, with a lot of things working in its favour.
High inflation coupled with the prospect of interest rates dropping had created a “really supportive” environment for gold, he said.
Because gold does not pay any interest, it tends to perform better in periods where rates are low or dropping. On top of that, global conflicts have also boosted demand.
Gold prices were up 21 percent in six months in US dollar prices: “It’s had a very strong run, there’s no signs of it slowing.”
Smith said all investors should diversify into multiple asset classes, because they did not move in unison. He said interest in gold had doubled among CMC clients, many of whom were short-term traders.
Gold had been a proven asset class “forever”, he said, although some people were now substituting bitcoin to fill the role that gold might previously have played in their portfolios.
“People want something that’s not the stock market, not the property market and technically an inflation hedge. Gold has continued to be an attractive asset class this year and the expectation is we go higher.”
David Boyle, former group manager of investor education at Sorted, said gold had proven to be a good investment over a long period of time.
“It’s a hedge to the high-flying equity market. If that’s feeling the pain and bond markets are feeling the pain, gold does rise in value.”
You can invest by buying gold directly, by investing in exchange-traded commodities (ETC), by buying shares in gold mining companies or funds that invest in them. You can also buy futures, which is a bit riskier.
I am in my late 60s, with a mortgage of just under $80,000 and savings of about $100,000. Will I ever be able to retire?
Liz Koh, a retirement planning specialist at Enrich Retirement, says you do have options.
She would recommend you pay off your mortgage first (if you need to wait until the end of a fixed term to do so without penalty, that may make sense).
She said you could then set up a line of credit or revolving credit facility to have as an emergency fund if you needed it – and keep working as long as you could.
When you got to the point where you were not able to work any more, you could look then at whether it was worth trying to free up some of the equity in your home.
That might mean downsizing your home to something worth a bit less, so you could get some money out, or considering an equity release loan – sometimes called a reverse mortgage.
Koh said you should keep some savings in the bank for your short-term needs but anything you would not use for more than five years should be in a fund, such as KiwiSaver, to give you a better return.
Boyle said you might also consider renting out a room in your house for another stream of income, if you could do so in a way that didn’t dent your enjoyment of your life.
You were not likely to be the only person in this situation – and a retirement village could even be an option for you, she said. “You would have fixed costs, you’d be able to get equity out of your property.”
Saving your pension and living on what you earn from work could also help you build up your investments.